Buying a Foreclosure | Understanding the Short Sale
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What is a Foreclosure?
A home in foreclosure happens when the owner has stopped making mortgage payments and the lender has given notice that unless the payments are brought up to date, it will take back the property. Lenders can foreclose for other reasons, but the most common reason lenders file a notice of default is when a borrower is at least two – three payments behind.
If the home owner does not bring the loan current, the lender will take back the property as collateral from the owner. Once the lender has take over ownership the property now becomes a Bank REO. Banks will then list the property with an REO agent to market the home for sale. Since banks are not in the business of owing and maintianing property, it is there goal to sell as fast as possible. Search Foreclosures Here
What are REOs – Real Estate Owned?
Buying an REO is similar to buying a short sale except the property is already owned by the lender. The property was acquired by the lender through a foreclosure action. Bank-owned properties are called REOs, meaning real estate owned by the lender.
REO homes are often considered the best way to buy property because the seller is already out of the picture. It’s just the investor, the investor’s agent, the bank and the bank’s agent who are negotiating the transaction. Real estate investors and home buyers see profit in buying foreclosures because they can often buy the property for less than fair market value.
What is a Short Sale Property?
A short sale occures when a home owned owes more than the property is worth and can no longer make the mortgage payments to the lender. A buyer comes along and makes an offer to purchase the home asking the bank to “short” the mortgage amount to what the homes real fair market value is or in most cases 10% – 20% below fair market value.
Unlike a foreclosure, Home buyers & investors typically buy the home for even less because they are not paying off the existing loan nor making up the back payments. These buyers are striking a deal with the existing lender to take less than what the lender has coming to avoid dealing with a foreclosure. The lender knows that if they foreclose on the home the process will be long and the properties condition will most likley deterioate making the property worth much less.
To learn more about “how to buy a short sale or foreclosure” contact Shawan Pettigrew at 352-478-4300
or go to Sterling Chase Realty on the web.
